A separate UN inquiry last year said the navy had shown an "unacceptable level of brutality".

The military operation severely strained relations with Ankara - a long-time ally of Israel's.

The 300-page Turkel Committee report found the actions of the Israeli navy in the raid and Israel's naval blockade of Gaza were both legal under international law.

The panel of inquiry - headed by retired Supreme Court Justice Jacob Turkel, with five Israeli members and two international observers - was set up in June.

One of the inquiry's members died aged 93 during its hearings, and correspondents say the report will be dismissed by Israel's critics as biased.

'Banditry and piracy'

The Free Gaza Flotilla, which had more than 600 pro-Palestinian activists on board, was trying to break Israel's blockade of the territory when it was intercepted by Israeli navy commandos on 31 May.

Israel says its commandos used live fire only after being attacked with clubs, knives and guns.

Analysis

By Jon DonnisonBBC News, Jerusalem

This report has been seven months in the making and it runs to some 300 pages. The raid was a disaster for Israel's public relations and the government was hoping this inquiry would do something to amend that.

The problem Israel is going to face is that many of its critics will see it as a whitewash. This was an Israeli government-commissioned inquiry and people will say it simply wasn't balanced.

The findings of this report were in stark contrast to the views of 600 pro-Palestinian activists aboard those ships. They also contrast with the findings of a UN report which said Israel's commandos had shown an unacceptable level of brutality.

This is not the last we will hear on the flotilla raid. In the coming months the Turkel Committee will look into what intelligence Israel had in the lead-up to this operation. And there is another UN investigation, ordered by the Secretary-General Ban Ki-moon, which is expected to release its findings later in the year.

But activists on board the Turkish-owned Mavi Marmara say the commandos started shooting as soon as they boarded the vessel.

The Turkel Committee report said Israel's actions had "the regrettable consequences of the loss of human life and physical injuries".

"Nonetheless... the actions taken were found to be legal pursuant to the rules of international law."

The report did offer some criticism of the planning of the operation, saying "the soldiers were placed in a situation they were not completely prepared for and had not anticipated".

The inquiry heard testimony from high-ranking Israeli officials, including Prime Minister Benjamin Netanyahu, Defence Minister Ehud Barak and army chief General Gabi Ashkenazi, as well as several Israeli-Arab lawmakers who were travelling with the flotilla.

None of the military personnel directly involved in the raid was authorised to provide testimony.

In August, Mr Netanyahu told the inquiry that Israel "acted under international law" when it intercepted the flotilla.

He said the Gaza blockade was legal and that Israeli troops only used force when their lives were in danger.

After its own inquiry, Turkey described the attack - which took place in international waters, about 130km (80 miles) from the Israeli coast - as a violation of international law, "tantamount to banditry and piracy", and described the killings as "state-sponsored terrorism".

Results of Turkish post-mortem examinations have suggested that a total of 30 bullets were found in the bodies of the nine dead activists, including one who had been shot four times in the head.

UN Secretary General Ban Ki-moon has asked for reports from both the Israeli and Turkish inquiries to be submitted as part of a wider UN inquiry to be held later this year.

Blockade eased

After criticism from its allies over the flotilla incident, Israel considerably eased its blockade of Gaza - allowing in more food and humanitarian goods.

Results of post-mortem examinations suggested one activist was shot four times in the head

Israel and Egypt imposed the blockade on the coastal territory when the Islamist militant group Hamas seized control of it in 2007.

Israel said it was intended to stop militants in Gaza from obtaining rockets to fire at Israel.

The restrictions were widely described as collective punishment of the population of Gaza, resulting in a humanitarian crisis.

But in the report released on Sunday, the Turkel Committee said: "The imposition and enforcement of the naval blockade of the Gaza Strip does not constitute 'collective punishment' of the population of the Gaza Strip."